Americans: How to wave yellow flag

Individuals slowly accepting gold among investments

ThomCalandra

SAN FRANCISCO (CBS.MW) -- Some of us may be sitting at our computer terminals, thinking, "I can't bring myself to buy gold because I think it is un-American. Or anti-economy."

After 9-11, who wants to be un-American?

Gold companies are this year's best-performing stock market investment. Just take a look at the CBS MarketWatch industry analyzer. Yet investment demand for gold, gold coins and gold mining companies still represents only a sliver of the activity in technology stocks.

Investors just the other day exchanged more than $3.3 billion worth of the vaunted cubes. Cubes are the trading slang for the Nasdaq 100 trust securities
QQQ, -0.36%
that represent America's faltering tech stocks. But on a good day for gold mining companies, Newmont Mining
NEM, -0.10%,
the world's largest producer of the metal, will see only $200 million or so of its shares change hands.

To be sure, the lure of gold is gaining currency. Futures traders of small lots (fewer than 200 contracts) on New York's Comex are net long more than 100 tons of the metal for only the fifth time. Helping is the fact that gold's price is decisively above $300 an ounce, and looking like it will stay there. See related story.

Plus, there are anecdotal signs sales of America's Gold Eagle coin are picking up, albeit slowly. Sales of U.S. Mint gold coins, priced at $318 per Eagle, are still well below levels of 1998 and 1999. See chart.

Let's be candid: tech stocks are getting hammered. America's favorite blue chips, like IBM, Ford, Pfizer and AOL Time Warner, are sinking like ships. Those-so-called Nasdaq cubes are erasing America's stock market wealth at an alarming pace. The QQQ's three-year return is a negative 44 percent. Meanwhile, those poor, un-American gold mutual funds made up 18 of the 20 biggest gainers in this year's first three months.

Some of the gold mutual funds - like the Gabelli Gold Fund
GOLDX, -2.14%
-- are up 60 percent year to date. The strongest mining companies, Newmont Mining in Denver and Gold Fields in South Africa
GOLD, +0.58%,
are up 60 percent and 160 percent, respectively, this year. Both companies decline to second-guess gold's price by "hedging" their gold sales via the use of complex forward-sales strategies.

Gold Fields, reporting its latest quarterly earnings Thursday, logged a profit rise of almost two-thirds to $98 million for the span of January through March. The company, seeking the limelight, is shifting its overseas listing to the New York Stock Exchange from Nasdaq next week.

Yet individual investors are showing few signs they are parting with their underwater tech stocks. With their retirement portfolios down 50 percent and more the past two years, ordinary folks should be crying in their soup. What is astonishing is that individuals don't grasp the gold story.

It's different in Canada. Gold's rally is worthy of a national holiday in that vast land of natural resources. At the least, it's a way of forgetting the travails of Nortel Networks, Canada's best known imploding telecom company. Canada has its share of winning gold mutual funds and companies, led by the Royal Precious Metals Fund, which is up about 60 percent year to date. Royal Precious Metal Fund's lead manager, John Embry, has been investing clients' money in Canadian mining stocks for 13 years. See Canadian mutual funds.

In South Africa, which along with Russia, America, Australia and Canada are the world's largest gold producers, bullion is also worthy of national celebration these days. A higher gold price is especially potent in South Africa because the sickly currency there, the rand, allows mining companies to save a bundle on expenses but book thick profits on their sale of gold, which they sell in dollars.

You can bet more than a few South Africans, miners and executives, will be partying when Gold Fields rings the NYSE opening bell next week. The company sees 50 percent of its shares traded outside the home market of Johannesburg. "We expect a splashy event," Gold Fields Chairman and outgoing CEO Chris Thompson said Thursday. As it stands now, Nasdaq investors in one day exchange just $30 million or so Gold Fields shares. That's a sliver of the spot price for the 4.5 million ounces Gold Fields mines each year. Gold Fields, South Africa's second largest bullion producer after Anglogold
AU, -3.83%,
is generating $35 million a month through its mining operations.

Back in America, moping investors are sitting around, wondering how to buy gold without raising the white flag. Sandy Lawrence, who directs mining conferences held in San Francisco, New York, South Africa and elsewhere, says individuals are slowly coming to see the merits of a gold portfolio.

"I have spoken personally with a number of investors who attended our San Francisco conference in November, and they are delighted that their gold stock picks have done so well," says Lawrence, president of International Investment Conferences. "But I don't think that the retail audience fully understands yet what is happening as we are seeing mostly previous attendees who are

registering." The group will stage its New York gold show, with more than 75 mining companies attending, in September.

Technology diehards, ordinary Americans, do lend me your ears. Sell some of the U.S. savings bonds, dump the tech stocks and diversify. A little gold never hurt anyone. A lot of gold just may buy you that retirement ranch.

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